Woodbois (LON: WBI) shares are down 63% this morning on news that no financial director really wants to hear - the bank has withdrawn the lending facility. Woodbois has some cash left but not much and while it's still a going concern in the short term definitively needs to find some new source of finance.
The problem is with Sydbank, who had granted Woodbois a $6 million lending facility. This was fully utilised - they had borrowed all they could under the terms of this contract. Well, OK perhaps in a cyclical business being at the tippy top of borrowing possibilities makes sense at one point in the cycle. But Sydbank is worried because the main Woodbois trading subsidiary had a bad first quarter and lost money. That's the reason for the facility being fully used - something perhaps structural, not cyclical. So, Sydbank called in the loan.
Woodbois share price from London Stock Exchange
So, the current cash situation for Woodbois is not good shall we say: “The Company has cash balances outside the Sydbank account of $430,000 and net trade receivables of $1.5m”. They might be able to work through that.
But it gets worse. For: “Woodgroup ApS has various banking arrangements with Sydbank, including the $6m Facility that was fully utilised and an ancillary account with a cash balance of $3.1 million. Sydbank have a floating charge against the assets of Woodgroup ApS and have offset this $3.1 million in partial repayment of the Facility.”
Well, OK. But it was only a month ago that Woodbois raised $3 million in new capital through a rights issue. Which is what that $3 million in the ancillary account was and which has been collected by Sydbank. That is, the rights issue just paid down the debt. And that's the real reason the shares are down 60% and more this morning. Woodbois has already done the obvious thing to gain more financing, that rights issue, and it's not solved the problem in the slightest. So, what can it do next?
